Investing

Retail Stocks Showing Strength; Some Form Bases

A big part of CAN SLIM is about buying leading stocks in top-performing groups. Retailers are showing some strength.

Even though headline November retail sales rose 0.3%, or below views for a 0.6% gain, retailers fared better than the market. SPDR S&P Retail ETF (XRT) rose a fraction vs. a 0.6% loss for the benchmark S&P 500.

In IBD's Industry Sub-Group Rankings, the Retail-Apparel/Shoes/Accessories group shot up to No. 66 in Thursday's edition, up from No. 132 three weeks ago.

Chico's FAS (CHS), the top stock by Composite Rating in the group with a 97, is in a flat base with a 19.86 buy point. The stock's base is a first-stage pattern after undercutting the low of a prior flat base last month.

In November, the operator of Chico's, White House Black Market and Soma Intimates beat expectations with Q3 earnings that jumped 39% to 25 cents a share. That was its best performance in five quarters.

Analysts see its full-year profit rising 31% to $1.10 a share.

Rival Urban Outfitters (URBN) cleared a 38.84 buy point in a slightly low handle Tuesday, but has pulled back after hitting resistance at 40. Generally, a handle should be above the midpoint of the base. Urban's handle was off by 24 cents.

Earlier this week, the teen-apparel retailer said in a regulatory filing that its Q4 sales are tracking in the high single-digits.

Elsewhere, Lithia Motors (LAD) is in a cup-with-handle base with a 37.09 buy point. The stock slipped under its 50-day line recently, but did so in light volume.

The auto retailer has posted double-digit to triple-digit profit growth for seven straight quarters. Sales grew by 25% or more in seven of the past eight quarters.

HSN (HSNI) is in a flat base with a 55.08 buy point. The stock in not a fast mover, but has been in a steady uptrend in recent months.

The multichannel retailer has delivered six straight quarters of double-digit earnings growth, but sales have grown by single digits.